Office of the Secretary Department of Finance

Office of the Secretary Department of Finance

P.O. Box 5234 CHRB, Saipan MP 96950 TEL: (670) 664-1100 FAX: (670) 664-1115

October 30, 2020 SFL 2021-014

Dr. Tiffany T. Forrester Group Leader, Insular Areas Rural, Insular, and Native Achievement Programs Office of Elementary and Secondary Education U.S. Department of Education 400 Maryland Avenue, SW | Washington, DC 20202

RE: UPDATE to Initial Report for Education Stabilization Fund-Governor (ESF-Governor) Initial Report

Dear Dr. Forrester:

This letter aims to provide additional requested reporting items for the ESF-Governor award provided by the CARES Act through the US Department of Education. The additional requested items are underlined. We hope it gives a better understanding of the timeline and creates a fuller picture of what the CNMI Government has undertaken. This includes the response to COVID-19 pandemic, CARES Act in the CNMI, and the implementation and plans of the ESF-Governors grant award.

Background

THE CNMI is a small remote territory under the United States situated in the Western North Pacific. Our tropical climate and marine resources have made tourism a key industry with visitors from China and South Korea making up approximately 85% of the market. When the COVID-19 pandemic threatened these nearby nations, it had a disastrous impact on our local economy and government revenues. This led to a budget decrease of 48.1% for FY2020 budget and beyond.

On March 15, 2020, Governor Ralph Torres declared a state of emergency and implemented health and safety measures to include but not limited to shelter-in-place directives, limited business activity, and a shutdown of non-essential government services. These efforts to control the pandemic has proved effective as the CNMI currently ranks as one of the safest jurisdictions in the United States from COVID-19.

On May 24, the CNMI government resumed operations with reduced work hours, furloughed hundreds of employees, and cut several programs due to the budget constraints. The CNMI Department of Finance is no exemption from these cost-cutting measures. Nevertheless, we are continuing to administer continuing federal programs and implementing the new CARES Act programs, including economic stimulus direct payments, pandemic unemployment insurance, and the ESF-Governor.

The CNMI government and people have always supported public education because of our underprivileged community. Our Commonwealth has a constitutional mandate to provide 25% of general revenues to the CNMI Public School System. These CARES Act funds, particularly the ESF-Governor, would help the children and students of the CNMI while we are under extraordinary financial distress.



Awarding the ESF-Governor award

Upon receiving the letter from the U.S. Secretary of Education on May 7th, we learned that the CNMI Public School System was to receive $23.2 million from the CARES Act. This provided educational support for primary and secondary education. This left unfunded a key component of our education system—the Northern Marianas College (NMC)—our only IHE.

This loss would deprive CNMI students, most of whom are low income, from receiving a post-secondary education that can improve their lives. The CNMI has always faced a constant shortage of skilled workers due to our remote location and our small impoverished economy. Our local college students contribute to improving our local economy and community by graduating and filling the necessary skill gaps by becoming local teachers, nurses, and professionals for our community.

Ultimately, Governor Ralph Torres committed the ESF-Governor grant to NMC. A transfer of funds in the amount of $4,777,211 was made on June 5, 2020. The CNMI has advanced the funds to NMC to be used according to the budget narrative as provided through form ED 524.

Attachment A provides the budget information and narrative for the proposed use of the funds through May 12, 2021. The CNMI will not use any funds for Administrative or Indirect Costs.

Internal Control Plan

The Department of Finance, in coordination with the Governor’s Office of Grants Management, will continue to monitor NMC as they fulfill the program’s goals and objectives.

Our current internal control plans are provided in Attachment B. As has been recommended in the CNMI’s Single Audit report, as well as federal agency desk audits, we are working to update our manuals to further strengthen internal controls and comply with Uniform Guidance requirements. Our initial work begins with paralleling an effective plan used in another jurisdiction. Our next step is to assign tasks and implement processes that match the CNMI’s limited capacity. Please refer to Attachment C for an initial template of updating our internal control plans.

The CNMI is requiring that NMC be audited annually to be included in the CNMI’s single audit. For reporting purposes, all primary records and documentation will be kept on file for 5 years at the subrecipient agency, Northern Marianas College. These records and other supporting documents shall be made available to the CNMI Office of the Public Auditor, the Office of Inspector General and/or independent auditors.

Sub-recipient Monitoring Plan

NMC will submit quarterly reports to the Department of Finance for review. The DOF will review the reports and make sure that they are in keeping with the CARES Act requirements. DOF will make then submit reports to the U.S. Department of Education based on CARES Act requirements.

In keeping with the goals of monitoring the ESF-G, DOF will ensure proper spending, measure sub-recipient performance, and identify opportunities, and need for improvement. DOF shall do this desk reviews, on-site and assessment visits, and regular communications.



DOF will give a post-visit questionnaire to NMC to help ascertain any need for improvement that DOF should improve upon to help NMC succeed in this grant. This will help DOF know what needs to be improved as the pass-through entity.

DOF will adopt any changes that US Department of Education requires in administering the grant. DOF will also relay those changes to NMC and will provide regular updates to NMC of communication with US Department of Education.

Forms related to Sub-recipient monitoring process are included in Attachment D.

In closing, the CNMI and the Department of Finance look forward to the working with the U.S. Department of Education in the successful execution of the grant. This grant is necessary for the sustainability of education for students in the CNMI. With this grant, NMC can continue to provide its services for our students, and ultimately improve the quality of life for them and their community. This ESF-Governor grant will save the dreams of our students at a time when hope is desperately needed.

I look forward to our on-going communications and reaching our shared educational goals. Together, we have a chance to build something better for the nation and CNMI.

Sincerely,

Secretary of Finance



Attachment A:

ED-Form 524

Budget Information and Narrative

Instructions for ED 524

General Instructions

This form is used to apply to individual U.S. Department of Education

(ED) discretionary grant programs. Unless directed otherwise, provide

the same budget information for each year of the multi-year funding

request. Pay attention to applicable program specific instructions, if

attached. You may access the Education Department General Administrative Regulations cited within these instructions at:

http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html. You may

access requirements from 2 CFR 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal

Awards” cited within these instructions at: https://www.federalregister.gov/articles/2013/12/26/2013-30465/uniform-administrative-requirements-cost-principles-and-

audit-requirements-for-federal-awards.

You must consult with your Business Office prior to submitting

this form.

Section A - Budget Summary

U.S. Department of Education Funds

All applicants must complete Section A and provide a break-down by

the applicable budget categories shown in lines 1-11.

Lines 1-11, columns (a)-(e): For each project year for which funding

is requested, show the total amount requested for each applicable

budget category.

Lines 1-11, column (f): Show the multi-year total for each budget

category. If funding is requested for only one project year, leave this column blank.

Line 12, columns (a)-(e): Show the total budget request for each project year for which funding is requested.

Line 12, column (f): Show the total amount requested for all project years. If funding is requested for only one year, leave this space

blank.

Indirect Cost Information: If you are requesting reimbursement for

indirect costs on line 10 the indirect cost rate to be charged to the

grant must be entered in the applicable field on line 10, and the following information is to be completed by your Business Office.

(1): Indicate whether or not your organization has an

Indirect Cost Rate Agreement that was approved by the Federal government. If you checked “no,” ED generally will authorize

grantees to use a temporary rate of 10 percent of budgeted salaries

and wages (complete (4) of this section when using the temporary

rate) subject to the following limitations:

(a) The grantee must submit an indirect cost proposal to its

cognizant agency within 90 days after ED issues a grant award notification; and

(b) If after the 90-day period, the grantee has not submitted an indirect cost proposal to its cognizant agency, the grantee may not

charge its grant for indirect costs until it has negotiated an indirect

cost rate agreement with its cognizant agency. (2): If you checked “yes” in (1), indicate in (2) the

beginning and ending dates covered by the Indirect Cost Rate

Agreement. In addition, indicate whether ED, another Federal agency (Other) or State agency issued the approved agreement. If you check

“Other,” specify the name of the Federal or other agency that issued

the approved agreement. (3): If you check “no” in (1), indicate in (3) if you want to

use the de minimis rate of 10 percent of MTDC (see 2CFR § 200.68).

If you use the de minimis rate, you are subject to the provisions in 2

CFR § 200.414(f). Note, you may only use the 10 percent de minimis

rate if you are a first-time Federal grant recipient, and you do not have

an Approved Indirect Cost Rate Agreement. You may not use the de

minimis rate if you are a State, Local government, or Indian Tribe, or

if your grant is funded under a training rate or restricted rate program. (5): If you are applying for a grant under a Restricted Rate

Program (34 CFR 75.563 or 76.563), indicate whether you are using a

restricted indirect cost rate that is included on your approved Indirect Cost Rate Agreement, or whether you are using a restricted indirect

cost rate that complies with 34 CFR 76.564(c)(2). Note: State or

Local government agencies may not use the provision for a restricted indirect cost rate specified in 34 CFR 76.564(c)(2). Check only one

response. Leave blank, if this item is not applicable.

(6): For Training Rate Programs, ED regulations limit non-governmental entities to the recovery of indirect costs on

training grants to the grantee’s actual indirect costs, as determined by

its negotiated rate agreement, or 8 percent of a MTDC, whichever is lower (see EDGAR § 75.562(c)(4)). The 8 percent limit also applies

to cost-type contracts under grants, if these contracts are for training as defined in EDGAR § 75.562(a). If a non-governmental entity

that receives a grant under a training grant program does not have an

approved indirect cost rate and wants to recover indirect costs, it may use a temporary rate of 10 percent of budgeted direct salaries and

wages, but it must submit an indirect cost rate proposal to its

cognizant agency for indirect costs within 90 days after ED issues the GAN. After the 90-day period, the government entity may not charge

its grant for indirect costs until it has negotiated an indirect cost rate

agreement.

Section B - Budget Summary

Non-Federal Funds

If you are required to provide or volunteer to provide cost-sharing or matching funds or other non-Federal resources to the project, these

should be shown for each applicable budget category on lines 1-11 of

Section B.

Lines 1-11, columns (a)-(e): For each project year, for which

matching funds or other contributions are provided, show the total contribution for each applicable budget category.

Lines 1-11, column (f): Show the multi-year total for each budget category. If non-Federal contributions are provided for only one year,

leave this column blank.

Line 12, columns (a)-(e): Show the total matching or other

contribution for each project year.

Line 12, column (f): Show the total amount to be contributed for all

years of the multi-year project. If non-Federal contributions are

provided for only one year, leave this space blank.

Section C - Budget Narrative [Attach separate sheet(s)]

Pay attention to applicable program specific instructions, if attached.

1. Provide an itemized budget breakdown, and justification by

project year, for each budget category listed in Sections A and

B. For grant projects that will be divided into two or more

separately budgeted major activities or sub-projects, show for

each budget category of a project year the breakdown of the

specific expenses attributable to each sub-project or activity.

2. For non-Federal funds or resources listed in Section B that are

used to meet a cost-sharing or matching requirement or provided

as a voluntary cost-sharing or matching commitment, you must

include:

a. The specific costs or contributions by budget category;

b. The source of the costs or contributions; and

c. In the case of third-party in-kind contributions, a description of how the value was determined for the donated or contributed

goods or services.

[Please review cost sharing and matching regulations found in 2

CFR 200.306.]

3. If applicable to this program, provide the rate and base on which

fringe benefits are calculated.

4. If you are requesting reimbursement for indirect costs on line

10, this information is to be completed by your Business Office.

Specify the estimated amount of the base to which the indirect cost rate is applied and the total indirect expense. Depending on

the grant program to which you are applying and/or your

approved Indirect Cost Rate Agreement, some direct cost budget categories in your grant application budget may not be included

in the base and multiplied by your indirect cost rate. For

example, you must multiply the indirect cost rates of “Training grants" (34 CFR 75.562) and grants under programs with

“Supplement not Supplant” requirements ("Restricted Rate"

programs) by a “modified total direct cost” (MTDC) base (34 CFR 75.563 or 76.563). Please indicate which costs are

included and which costs are excluded from the base to which

the indirect cost rate is applied.

When calculating indirect costs (line 10) for "Training grants" or

grants under "Restricted Rate" programs, you must refer to the information and examples on ED’s website at:

http://www.ed.gov/fund/grant/apply/appforms/appforms.html.

You may also contact (202) 377-3838 for additional information

regarding calculating indirect cost rates or general indirect cost

rate information.

5. Provide other explanations or comments you deem necessary.

Paperwork Burden Statement

According to the Paperwork Reduction Act of 1995, no persons are

required to respond to a collection of information unless such collection displays a valid OMB control number. The valid OMB

control number for this information collection is 1894-0008. The time required to complete this information collection is estimated to

vary from 13 to 22 hours per response, with an average of 17.5 hours

per response, including the time to review instructions, search existing data sources, gather the data needed, and complete and review the

information collection. If you have any comments concerning the

accuracy of the time estimate(s) or suggestions for improving this form, please write to: U.S. Department of Education, Washington,

D.C. 20202-4537. If you have comments or concerns regarding the

status of your individual submission of this form, write directly to (insert program office), U.S. Department of Education, 400 Maryland

Avenue, S.W., Washington, D.C. 20202.

U.S. DEPARTMENT OF EDUCATION Education Stabilization Fund (ESF) - Governors

Northern Marianas College Budget Narrative

Northern Marianas College (NMC) intends to utilize ESF-Governors grant funds to provide critically needed emergency support to address the impacts of the Novel Coronavirus Disease 2019 (COVID-19) on the College. Funds will be used to support the ability to continue to provide educational services and support the ongoing functionality of the CNMI’s only US-accredited institution of higher education. Due to the Fiscal Year 2020 projected shortfall, further anticipated reduction in state funding for Fiscal Year 2021, and continued economic uncertainty in the CNMI due to COVID-19 travel restrictions, funds will be used to defray expenses related to salaries, additional Personal Protective Equipment (PPE) and supplies, and various Information Technology broadband, network, and infrastructure upgrades. ESF-Governors grant funds will be used to cover expenses for the period of performance of 5/12/2020 through 5/12/2021.

NMC shall comply with all federal and state reporting requirements including those in section 15011(b)(2) of Division B of the CARES Act as well as any additional reporting requirements from the U.S. Department of Education. Furthermore, NMC will cooperate with any examination of records with respect to ESF-Governors funds by making records available for inspection, production, and examination upon request.

Intended Use of Funds:

1. PERSONNEL (Total $4,027,211). Northern Marianas College intends to use a reasonablesum of ESF-Governors grant funds to meet anticipated Fiscal Year 2021 budgetary cutsrelated to salaries of non-federal Faculty and Support Staff. NMC does not, however,intend to use such funds for fringe benefits and the salaries of executives andadministrators.

2. EQUIPMENT (Total $613,000). After comprehensive assessments of NMC’s existing ITinfrastructure, and to meet the current demand for remote learning programs and offsitenetwork accessibility, there is a critical need build IT capacity to support such demands.With the current aging equipment, NMC is unable to perform critical upgrades tofirmware due to obsoletion and technical support unavailability. IT upgrades include thereplacement of the campus’ main CORE switch as well as to augment a backup unit foradded assurance. The current system was purchased and implemented in 2009 andcannot support the additional load and network requirements for new facilities, offsitenetwork accessibility due to increased teleworking and online instruction as a result ofCOVID-19 social distancing. Necessary licensing, firewall protection, and other LANnetwork components will be included.

3. SUPPLIES (Total $37,000). The additional supplies will be used for a contingency capacityof necessary sanitary supplies and Personal Protective Equipment (PPE) should there bean anticipated regional or national shortage. While current supply may meet the NMC’s

current or anticipated utilization rate, there may be uncertainty if future supply will be adequate and therefore, contingency capacity strategies may be needed.

4. OTHER (Total $100,000). With respect to stringent educational social distancing

measures, additional items related to distance education and virtual learning platformsare needed, such as laptops for faculty & staff, and various VTC equipment items thatallow for online/virtual instruction.

5. ADMINISTRATIVE / INDIRECT COSTS (Total $0.00). The CNMI Office of the Governor / Northern Marianas College will not reserve or use any funds for Administrative or Indirect Costs from the Governor’s Education Stabilization Fund.



Attachment B:

Internal Control Plans

(Current) Federal Grants Management and

Cash Management Policies and Procedures

II. Basic Guidelines:For a cost to be allowable under Federal awards, they must meet the following criteria:

1. Be necessary and reasonable for proper and efficient performance andadministration of Federal award. 2. Be allocable to Federal awards. 3. Be authorized under state laws and regulations. 4. Be consistent with policies, regulations and procedures that apply uniformly toboth Federal awards and activities of the grantee department. 5. Be determined in accordance with generally accepted accounting principles. 6. Not be included as a cost or used to meet matching requirements of any otherFederal award except as provided by Federal law or regulation.

7. Be net of all applicable credits and discounts. 8. Be adequately documented.

III. Federal Grants Procedures Notification of Grant Award. Upon notification from a grantor, the grantee departmentor agency, must notify the Office of Management and Budget and the Department ofFinance.

1. Establish an Allotment Advice. A grantee department or agency must request foran allotment from the Office of Management and Budget. The allotment must containa budget summary of how the funds will be distributed. If a budget summary isprescribed by a grantor agency, then that documented will prevail (See Attachment A - Sample Allotment Form) 2. Establish a Business Unit. A grantee department or agency must request for abusiness unit from the Department of Finance. Copies of the grant award, grantguidelines, and the allotment advice must be provided along with the request.

TEL: 670-664-1115P.O. BOX 5234 CHRB, SAIPAN, MP 96950

Division of Finance and Accounting | www.cnmidof.net

Cost Encumbrance. After a business unit is established, a grantee department mayencumber a cost through a form of contact as provided in the definition.

a. Contracts - the Director of Finance and Accounting shall ensure that all contractsadhere to the terms and conditions of the grant agreement, and comply with OMBCircular A-87 with regard to reasonableness, allowability, and allocability of the costsprior to certifying the contract. b. Purchase Requisition - requisitions should be entered online on the financialmanagement system at program office level. The Director of Finance and Accountingshall review whether there are funds to cover the requisitions, whether they meet theterms and conditions of the grant agreement, and whether they comply with OMBCircular A-87 with regard to reasonableness, allowability, and allocability of the cost.Division of Procurement and Supply produces the purchase order upon approval byFinance and Accounting.

Payment Vouchers. The Division of Finance and Accounting processed paymentsvouchers. Vendors and contractors must do the following in order to do so:

a. Contracts - contractors must submit billings to the department who contracted theservices for approval. Upon approval, the department can submit the request forpayment to Finance and Accounting. b. Purchase Orders - A vendor must submit to Finance and Accounting an originalinvoice along with the original purchase order to process payment voucher.

Drawdown of Federal Funds. Upon processing of a payment voucher, the Federal GrantSection of Finance and Accounting shall initiate the drawdown of Federal funds for thepayment of the voucher using the standard for SF-270. If the SF-270 is not required bythe grantor agency, an alternate form approved by Finance and Accounting may beused. (See attachment B & C for SF-270 and sample drawdown form). The Treasurydraws federal funds online using the SMARTLINKS system, or an alternate methodrequired by grantor agency. Issuing Payments. The Division of Treasury processes vendor payments. Paymentvouchers processed by Finance and Accounting are submitted to the Treasury forpayment. Payment terms are net 30 days. Unless otherwise restricted by a grantor



agency, vendors being paid with Federal funds will be paid after the funds are received.If Federal funds are received, payment must be maid in compliance with the CMIAagreement between the CNMI government and the U.S. Treasury. Recording of Federal Grants Receipts. On a regular basis, monthly or sooner, theTreasury shall provide bank statements, or reports from the cash management system,of the Federal grant account to the Director of Finance and Accounting. The statementsshall contain the deposits of Federal funds from the U.S. Treasury. Finance andAccounting shall record each deposit to the respective business unit under which adrawdown was requested. Compilation of SF-269. The SF-269, financial status reports, are completed quarterly,semi-annually or annually, based on the requirement from the grantor agency. TheFederal Grants Section of Finance and Accounting runs the necessary fund status reportfrom the financial management system for the particular grant. The report is used tocomplete the SF-269. (See attachment D for SF-269). Deadlines. The Federal Grants Section must complete all financial status reports no laterthan 30 days after the close of the period being reported. Any other reportingrequirement set by the grantor agency must be adhered to. The annual financial statusreports are due within 90 days of the close of the fiscal year, or no later than December30. Request for Extension. The Director of Finance and Accounting, or his or her designee,may request for an extension from the grantor agency citing the reason for the request.The Director shall notify the grantee agency of the request. Submission of SF-269. Unless otherwise required by a grantor agency, all SF-269 shall besubmitted by Finance and Accounting. Grantee agencies may request alternatearrangements to accommodate deadlines.





Attachment C:

Template to update Internal Control Plan

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Table of Contents

Introduction………………………………………………………………………………3

Five Components of Internal Control…………………………………………………….4

Control Environment…………………………………………………………............…4

Organizational Chart……………………………………………7

Risk Assessment………………………………………………………………...……..….7

Control Activities…………………………………………………………………...........8

Collections/ACHs………………………………………………………………8

Disbursements/Drafts………………………………………………….9

Safeguarding Assets………………………………………………….10

Compliance………………………………………………………………11

Information and Communication……………………………………………..12

Monitoring………………………………………………………………………….....13

Summary…………………………………………………………………………...……14

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Internal Control Manual Introduction The City of Lakeland has the responsibility to its taxpayers, ratepayers, and constituents to be good stewards of public monies and property. In our efforts to serve the public as city officials or employees, the City established this Internal Control Manual using widely recognized best practices and state and federal directives.

State of Tennessee statutes require the Comptroller’s Office, Department of Audit to prescribe uniform accounting systems for entities that handle public funds. Those statutes require public officials to adopt and use the system designated by the Comptroller’s Office. The Tennessee Legislature amended TCA Section 9-2-102 in 2015 to require local governments to establish and maintain internal controls in accordance with guidance issued by the U.S. Government Accountability Office (GAO). The guidance is titled Standards for Internal Control in the Federal Government (Green Book). The Green Book follows the format developed by the Committee of Sponsoring Organizations (COSO) which has been the gold standard of internal control for all entities except the federal government for several years.

The internal control system consists of three (3) objectives and five (5) main components.

THREE (3) OBJECTIVES OF INTERNAL CONTROLS:

1. Reporting – reliability 2. Operations – effective and efficient 3. Compliance – compliant with applicable laws, regulations, contracts and

grant agreements FIVE (5) MAIN COMPONENTS OF INTERNAL CONTROLS:

1. Control Environment 2. Risk Assessment 3. Control Activities 4. Information and Communication 5. Monitoring

The purpose of this manual is to ensure that the objectives of reporting and compliance are established. The policies to achieve the objectives are derived from various financial best practices, state and federal laws, and regulations and policies may be developed to suit specific needs of city functions and resources. Detailed procedures are then developed and documented as a means for cities to comply with its established policies.

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Five Components of Internal Control 1. Control Environment Overview

The control environment is the foundation for all other components of internal control, providing discipline and structure. Moreover, management establishes the tone at the top regarding the importance of internal control and expected standards of conduct, and reinforces expectations at various levels. Control environment factors include the integrity, ethical values, and competence of the city's personnel; the way management assigns authority and responsibility, and organizes and develops its personnel; and the attention and direction provided by the governing body. Objectives

The governing body and management should: 1. Conduct business with integrity and ethical behavior. 2. Provide direction and oversight for city’s internal control system. 3. Hire qualified and competent management. 4. Establish structure, authority and responsibility, and hold individuals

accountable for internal control responsibilities. Policies

1. The governing body through management has adopted a personnel manual that details policies, expectations, and other employment-related topics.

2. Each employee receives a copy of the city’s personnel manual, which includes a policy on business ethics and conduct, and signs an acknowledgement of receipt.

3. Management has developed job descriptions for each position and reviews employee compliance on an annual basis through performance evaluations.

4. The governing body uses the budget process as a means of oversight with department heads.

5. Organizational charts are reviewed for needed changes in regards to authority and responsibility.

Procedures

• The Finance Director/CMFO reviews the personnel manual annually to determined needed revisions to comply with federal and state laws, as well as practices of the city.

• The City Manager reviews suggested revisions, if any, by the Finance Director/CMFO and presents the finalized manual to the Board of Commissioners for approval.

• The city holds annual required training where human resource topics are covered. The code of conduct and the personnel manual are always part of the training.

• Detailed job descriptions with minimum job requirements are maintained for each position within the city.

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• Department heads review employee job descriptions annually to ensure compliance and document employee performance and conformity through an annual employee evaluation.

• The Finance Director prepares the annual budget beginning in March, with input from the City Manager and department heads, using historical data from the three (3) previous years. The Finance Director also prepares an annual capital budget.

• The proposed budget is presented to the Board of Commissioners during at least one (1) budget workshop in April. The City Manager, Finance Director, and all department heads are present to explain their budgets or request additional funding.

• The budget ordinance is prepared for first reading in May and second reading in June. The required public notice is published in the local newspaper no less than ten (10) days prior to the second and final reading.

• City organizational charts were developed based on the city structure required in the city charter.

• The charts are reviewed periodically as job descriptions and positions are added or changed to determine if the reporting structure, authority, and responsibility documented in the chart is still accurate.

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2. Risk Assessment Overview City officials and management assess risk of operations continually. The city has chosen to transfer the most common types of risk through the purchase of the following types of insurance:

1. Property and Casualty 2. Liability 3. Errors and Omissions 4. Worker Compensation 5. Surety Bonds

There are risks we cannot anticipate or know about, and as it relates to financial and compliance issues, we have assessed the following areas and identified certain risks that we feel need to be addressed by the development of internal control policies and procedures. Internal controls will not eliminate all risk but will help reduce risk to gain reasonable assurance that reporting and compliance objectives are being met.

There are risks we cannot anticipate or know about, and as it relates to financial and compliance issues, we have assessed the following areas and identified certain risks that we feel need to be addressed by the development of internal control policies and procedures. Internal controls will not eliminate all risk but will help reduce risk to gain reasonable assurance that reporting and compliance objectives are being met. Objectives

1. Collections are complete, timely, and accurate. 2. Disbursements are for a valid city purpose and properly recorded. 3. Assets are properly safeguarded. 4. City is in compliance with contractual, local, state, and federal laws

and regulations. Risks

1. Collections could be lost or misappropriated. 2. Collections could be recorded improperly. 3. Collections may not be deposited in the bank and recorded timely. 4. Disbursements could be unauthorized. 5. Disbursements could be for personal items. 6. Disbursements could be made for items never received. 7. Bank balances may be inaccurate due to failure to reconcile bank accounts. 8. Capital assets or inventory items could be missing. 9. Inventory is not available when needed. 10. Grant funds could be spent for unallowable items.

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11. Grant rules may not be followed which could result in having to return federal funds.

12. Federal reporting requirements were not met. The significant areas of risk are identified above and policies and procedures will be documented in the next section to explain how the city plans to put internal controls in place to help reduce some of the risks associated with these areas of operations.

3. Control Activities Overview

Detailed procedures will be documented in this section. The objectives, policies, and implemented procedures will be described for each of the significant areas identified in the Risk Assessment section. Collections/ACHs Objectives

1. Collections are complete, timely and accurate. 2. Collections are safeguarded. 3. Collections should be recorded accurately and timely in the accounting

system. Policies

1. All collections will be receipted to the appropriate fund and revenue code and recorded in the general ledger daily.

2. A pre-numbered receipt will be issued for each collection made. 3. The cash drawer and payment lockbox will be reconciled daily by two

people and the receipt log with be signed. 4. No checks will be cashed from the cash drawer. 5. All funds will be deposited within three (3) business days. 6. The cash drawer will be locked when unattended and placed in a

designated area after hours. 7. At no time will cash be left out in the open unattended. 8. Collections and associated receipts will be immediately placed in the

payment lockbox. 9. Employees are prohibited from comingling city assets with personal assets. 10. Deposits containing cash are delivered to the bank in locked bank bags. 11. Chart of accounts codes will be reviewed with the cashier on a regular basis. 12. All daily collection reports are posted to the general ledger by the

accounting system at the end of each business day as part of the cashier’s daily closing process.

13. Reconciliations are performed monthly by the Finance Director. Procedures

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• The cashier will enter all collections immediately in the accounting system using the correct fund and revenue code.

• The cashier will immediately stamp all checks “for deposit only” in the appropriate fund bearing the city’s name.

• A pre-numbered receipt is issued for all collections by the accounting system. Receipt lists date, amount, payer, proper accounting code, cash or check and is signed by cashier. One copy is given to every customer and one copy is retained with the daily receipt log with proper backup documentation.

• The cashier will reconcile his/her cash drawer daily. All collections will be put into the payment lockbox and retrieved daily by the Finance Clerk for review, verification, and preparation of the deposit.

• The prepared deposit will be given to the Finance Director to review and verify. • Another employee, independent of the collections process, will deliver

the deposit to the bank in a locked bank bag. • The deposit receipt will be returned to the Finance Clerk for reconciliation

with the receipt log and general ledger report. • The Finance Director will reconcile the bank statements on a monthly basis

and the City Manager will review reconciliations. Dates will be compared to deposit records for timeliness. Receipts will be reviewed for accurate amounts, coding, proper signature, and other required information.

• The cashier retains the key to the cash drawer. The drawer is to remain locked at all times when unattended.

• The cash drawer will be locked in a designated area after hours and on weekends.

• The cash drawer will be reconciled daily by two people and a cash report will be signed by both employees.

• The payment lockbox will be reconciled daily by the Finance Clerk. The lockbox will remain locked at all times and the Finance Clerk will have the only key.

• The Finance Clerk will place all deposits containing cash in a locked bank bag for deposit. The Finance Director and bank will have the only (2) keys.

• The Finance Director will reconcile the daily cash reports, deposit slips, and bank statements on a monthly basis.

• The Finance Director will periodically perform surprise cash counts to ensure there are no personal checks being held in the cash drawers and to ensure the drawers are in balance.

• All revenue codes used by the city are kept with the cashier. The Finance Director will notify the cashier if an account code is changed or added.

• The cashier posts the daily transactions to the general ledger after reconciling each day.

• The Finance Clerk will review the transactions for accuracy and make any adjustments or changes with the approval of the Finance Director.

• The Finance Director will reconcile the daily cash reports, deposit slips, and bank statements on a monthly basis.

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Disbursements/Drafts Objectives

1. Disbursements are for a valid city purpose and necessary. 2. Disbursements are timely. 3. Disbursements are accurately coded and recorded in the accounting system. 4. Disbursements are legally appropriated.

Policies

1. The city has adopted purchasing policies that comply with state law. 2. Various levels of authority have been assigned. 3. Purchase orders and packing slips are matched and given to the Finance

Clerk for payment as soon as possible. 4. Checks are written weekly to ensure timely payment of invoices. 5. All checks require two signatures. 6. All checks have documentation attached at the time of signing.

Procedures

• All purchases will be made in accordance with the City’s purchasing policy. • Employees will complete a purchase order when appropriate. The

employee’s supervisor will review and authorize the purchase order. • The Finance Clerk will enter purchase orders into the accounting system

to encumber the funds and ensure compliance with the budget. • The Finance Clerk will verify that packing slips and purchase orders match

before payment of invoices. • The Finance Clerk will prepare weekly check batches using backup

documentation and present the batches to the Finance Director for review and approval of expenditure codes.

• The Finance Director verifies all expenditure codes for accuracy and availability of funds prior to the Finance Clerk processing check payments.

• The Finance Director and City Manager review backup documentation and manually sign all checks. The Planning Director may act as a second signer in the absence of either the Finance Director or City Manager.

Safeguarding of Assets Objectives

1. Ensure city assets are properly valued and protected. 2. Ensure cash and other asset accounts are reconciled. 3. Ensure investments are safe and in accordance with adopted investment policy. 4. Ensure city assets are protected against loss, misappropriation, or theft. 5. Ensure inventory items are available when needed for use.

Policies

1. All bank account statements (checking, savings, investments, etc.) are reconciled to the general ledger accounts within 15 days of the date of the statement.

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2. All bank accounts are appropriately collateralized. Bank accounts maintained in the State Collateral Pool are classified as “Public” on the bank’s records.

3. All bank accounts are held in financial institutions under the city’s name and only authorized employees (two signatures required) are allowed to open new accounts with the approval of the Board of Commissioners.

4. All withdrawals, checks, liquidations, etc., from any bank account require two signatures.

5. All investments require two signatures. 6. Inventory records contain enough information to readily identify corresponding

capital assets. Capital assets are tagged or otherwise identified during a physical inventory that is performed annually.

7. Proper safeguards are in place to prevent theft or loss of assets.

Procedures

• The Finance Director reconciles the bank account statements to the general ledger on a monthly basis using an account analysis of each cash account.

• The City Manager reviews and approves the reconciliations and any adjustments to the general ledger.

• Reconciling items will not be carried forward more than sixty (60) days. • The reconciliations are reviewed annually by external auditors. • Any requests for new bank accounts are presented to the Board of

Commissioners for approval. If approved, the Finance Director and City Manager will complete the necessary paperwork to open the new account in the city’s name and ensure that the bank holds the funds in a “public” account.

• The Finance Director will annually review the accounts for accuracy of signers and proper collateralization.

• Assets valued in excess of $500 will be appropriately marked or tagged. • The Finance Clerk performs an inventory count on an annual basis. Disposal

of inventory is done in a way that sensitive information cannot be retrieved. • Insurance policies are reviewed and renewed annually for accuracy of

covered assets. • Surety bonds are renewed on an annual basis for all employees that

handle cash. Compliance

Objectives

1. Ensure that state laws regarding the issuance of debt are followed. 2. Ensure that state and federal grant regulations are understood and followed.

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3. Ensure that note disclosures in the financial statements contain all required elements.

Policies

1. The city has adopted and maintains a debt management policy in accordance with state requirements.

2. The Finance Director consults with the city’s financial advisor on all debt-related issues.

3. Every department must notify the Finance Director when an application for 100% grant funding is submitted and subsequently awarded.

4. All grants with matching requirements must be approved by the City Manager and Finance Director, and subsequently approved by the Board of Commissioners, prior to submission of application.

5. Once awarded, the Finance Director is to be notified of the project budget and detailed expenditure requirements of the grantor agency.

6. The Finance Director must be provided with the grant contract information, grant or contract numbers, and whether the grant is state or federal funds.

7. The Finance Director will amend the budget as necessary to accommodate awarded grant revenues and expenditures.

Procedures • The City Manager and Finance Director annually review the debt

management policy with the city’s financial advisor. • Before the issuance of debt, the Finance Director consults with the city’s

financial advisor to determine the impact or implications to the city’s financial well-being.

• The Grant Administrator is responsible for working with the Finance Director to submit all grant applications.

• All grant applications for grants requiring matching funds will be presented to the Board of Commissioners for approval before submission to ensure that funding will be made available.

• The Finance Director will determine any needed budget amendments upon receiving notice of award for any grant funds. The budget amendments will be presented to the Board of Commissioners for approval.

• Grant management responsibilities will be assigned to an appropriate employee for every grant. This will usually be the Grant Administrator.

• The Finance Director will be notified when any reimbursements have been submitted so that the revenue can be allocated to the appropriate revenue code.

• A copy of every grant application and contract will be filed with the City Recorder and secured electronically

4. Information and Communication

Overview Management has the responsibility to adequately communicate and provide information to both internal and external parties. It is important that employees know the objectives, policies, and procedures management has established and what the

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expectations are for internal controls. External stakeholders (citizens, developers, creditors) also seek information regarding objectives and reliable financial information. Policies 1. An annual risk assessment will be conducted to ensure that internal controls continue to work as designed over time. 2. The city will establish more efficient and effective operations over time. 3. Accurate and reliable information will be used in decision-making. Procedures • Management annually evaluates the state of the internal control system and

determines any deviations from the designed criteria and the current condition of the system.

• Management makes a decision on whether to change the design of the internal control system or implement corrective actions to improve the effectiveness of the existing system.

• Members of management will periodically review the procedures outlined in this manual to ensure that policies are being implemented and objectives are being met.

• Financial reports will be generated monthly and reviewed by those in a position of authority over financial operations. Those in a position of authority include, but are not limited to, the Finance Director/CMFO, City Manager, and Board of Mayor and Commissioners.

Summary The framework of this manual complies with the state requirements and was created using the Green Book as guidance. This manual will be reviewed annually and updated as needed. All employees of the City of Lakeland will be required to abide by the policies and procedures outlined in this manual, as well as any corresponding state laws. The manual will be made available electronically and in paper form. The City of Lakeland will abide by the Internal Control and Compliance Manual for Governmental Entities and other Audited Entities in Tennessee issued by the Comptroller of the Treasury. Supplementary Information TN Comptroller of the Treasury http://www.comptroller.tn.gov Internal Control and Compliance Manual (12/2015) http://www.comptroller.tn.gov/la/pdf/20150202ICCManual_Complete.pdf



Attachment D:

Sub-recipient Monitoring Forms

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1. Has there been any change in the structure/operation of the grant program? If yes, describe

2. Has there been staff turnover in key positions? If yes, what are the affected positions and reasons for turnover?

3. Do you have written policies and procedure manual? If yes, attach its table of contents and list of appendices

4. Do you have a license to operate a business? If yes, has there been any recent change in the license status? List the business license number and any other government issued identifying number that is associated with your agency.

5. Are you accredited by an organization? If yes, has there been a recent change in the accreditation? Who is the accreditor

6. Do you have property and liability insurance? If yes, do you have a certificate of insurance on file? Who is the carrier?

7. Does your agency operate satellite sites or other branches? 8. Describe procedures for safeguarding confidential information.

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I hereby certify that all of the above information is true and correct to the best of my knowledge and belief.

NOTE: Return the completed questionnaire to your grant program staff. Your delay in returning this form may interrupt the processing of subgrants or payments.

Signature of Executive Director or Other Authorized

Agent Date Signed

Title

CNMI Subrecipient Monitoring Tools:

Site Visits Communications

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Scheduling a Site Monitoring (SM) Visit The primary contact will schedule a routine SM Visit at least four weeks in advance by contacting the site coordinator or project director to:

Schedule the date and time of the SM Visit (include arrival time and approximate length) Designate staff to be interviewed (at a minimum, the Project Director, Fiscal Officer, and grant-funded staff);

o Primary contact will create an agenda for the SM Visit

• The agenda will include approximate times to meet with different staff, materials that will be reviewed with these staff members, and topics of discussion.

• The agenda will be submitted to the subrecipient site coordinator or project director at least two weeks in advance of the SM Visit and will allow for subrecipient feedback and topic changes

Outline the need for access to program and fiscal files and documents

Inform the site coordinator or project director that additional items may be requested at the time of the SM Visit.

Assess the need to plan technical assistance during the SM Visit.

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Internal Review prior to (SM) Visit Prior to the SM Visit, the Primary Contact will review materials submitted by the subrecipient to the grantee's office. Following is a list of items to be included in the review process, as well as questions to assist the Primary Contact in his/her analysis of the materials.

Program File Review: funding application; performance reports; correspondence & previous site monitoring report.

Are there any clarifications that need to be made? If so, what? Are more details needed? If so, what? Any "red flags?" Any difficulties the project is encountering? Weaknesses of the project? Strengths of the project? Compliance with certified assurances issues? Are timelines being met? Are the DUNS # registration current?

Program's fiscal information: overall budget, reimbursement claims, any budget revision requests, any key purchases with grant funds or matching funds, and audit review summary prepared by the subrecipient

Are there any clarifications that need to be made? If so, what? Are more details needed, If so, what? Any "red flags?" Are timelines being met? Ask the grant management office about any concerns Printout the program's Implementation Plan and Budget Review Pre-Site Monitoring Tool completed by program prior to SM

Visit After reviewing the above items and considerations, the primary contact will

create a list of questions and concerns for the SM Visit utilizing the checklist

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Sample SM Visit Scheduling Email

Dear Subrecipient,

I am sending this message to schedule a grant monitoring visit.

The purpose of the grant monitoring visit is to monitor grant programmatic and fiscal activities. The review consists of an interview with agency personnel responsible for the management of the local subrecipient contract. The interviewees should be a team that may include the agent Executive Director, the program director, the site coordinator, the program contact, the fiscal manager and grant funded personnel.

The following outline contains topics that may be covered during the on-site review:

Progression towards the goals and objectives of your program. The accomplishments of your program. Past and future projects. Training sessions your program staff have attended or implemented. Collaborations with other agencies. Compliance requirements in regards to financial, progress and Annual Progress Reports. Fiscal review. Concerns or issues. Your agency's comments, issues or questions.

Following the grant monitoring visit, the internal evaluator will review the information presented during the review process. The grant monitoring visit will be documented and placed in your agency's file. If necessary, a corrective action plan will be implemented.

Please confirm by reply to this message or by telephone your availability next week if possible.

Thank you

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Sample Site Monitoring Follow-Up Report

October 31, 2014

Mr. John Smith, Director Address

Dear Mr. Smith:

It was a pleasure to meet with your fiscal team on October 30, 2014. As you know, according to OMB Omni Circular 2 CFR 200, Subpart D 330, a grantee shall monitor activities of subrecipients as necessary to ensure that Federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts and grant agreements. As the internal evaluator, it is one of my responsibilities to perform an on-going grant fiscal compliance monitoring review of each project. The purpose of this review is to verify you are operating in accordance with the federal grant and applicable laws and regulations, as well as to ensure subrecipient project files contain all the required documentation for the project. The preliminary results of your monitoring visit gleaned the following concerns and suggested recommendations:

Concern: No prior approval is secured prior to travel. Recommendation: Have staff who will be traveling with federal funds complete a prior approval travel form (See attached example) that clearly states their per diem rate, their conference hotel rate, and other pertinent travel costs. Also make all staff award of the state travel policies and the maximum cost allowed for in-state hotel rates, etc.

Concern: Travel costs have not been verified prior to reimbursement. Recommendation: Create new travel policies that either reflect your district policies or that the follow the State of travel policies which can be found at

http://sao.state.wv.us/Travel/Travel instructions.pdf. Your travel policies should indicate your per diem rate for conference attendance, and this rate must be consistent throughout all federal grant programs. For example, you should not be paying a higher per diem rate for one grant as opposed to another grant.

Concern: Contracts are not on file for professional services paid with grant funds and no proof of liability insurance is found in your files for these professional services.

Recommendation: Federal policy states that any professional service paid for with federal funds require a signed contract. Please require a written contract for any professional services rendered and paid with federal grant funds prior to services being rendered. I am attaching a sample contract that could be used. In addition, your purchasing policies should be revised to include language concerning professional service requirements. Also, please ensure that all vendors who provide professional services and will be paid with federal funds provide your district with proof of liability insurance prior to services rendered.

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Concern: Purchases made prior to securing a purchase order. Recommendation: No purchases that are made with federal funds should be approved if a prior purchase order was not secured for this purchase. Please update your purchasing policies to reflect this requirement and hold steady on this, to ensure this practice is avoided in the future. This is a basic internal control strategy for a control environment that must have administrative support.

Concern: Teacher stipends for professional development attendance are inconsistent across grant programs. Recommendation: Consider writing new policies to address this issue to ensure that all teachers receive the same consistent stipend for any federal grant program. Stipends and per diem rates that are listed in your project grant are merely place holder amounts that are used for all districts to ensure that variations in stipend payments between the districts are covered. However, your district should be consistent with your written policy on stipend amounts and these amounts should be consistent across all federal programs.

If I can answer any questions about my review, please feel free to contact me at [email protected]

Thank you for all your hard work.

Sincerely,

Documents

Office of the Secretary Department of Finance